Multinomial Choice with Social Interactions: Occupations in Victorian London

We study the importance of social interactions on the occupational choice in Victorian London using a multinomial choice model within an incomplete social network. Individuals form heterogeneous rational expectations about their peers' behaviors taking into account their characteristics and the strength of their ties. We show the conditions under which the endogenous, exogenous and correlated effects can be identified and a unique equilibrium can be established. Using a novel dataset, we proxy social groups by parish boundaries and strength of ties by geographic distances. Our results show the importance of the endogenous effects and reveal distinct effects by occupation.